Hangzhou Tongshifu Cultural and Creative (Group) Co., Ltd. (“Tongshifu”, 00664) has released a detailed Terms of Reference for its Board Audit Committee, formalising governance practices in line with the Company Law of the PRC, the Hong Kong Listing Rules and the company’s Articles of Association. Key provisions are as follows:
• Committee Composition – Minimum of three non-executive directors, with a majority being independent non-executive directors (INEDs). – At least one INED must hold recognised professional accounting or financial expertise. – Former partners of the company’s external auditor are barred from committee membership for two years after leaving the audit firm or divesting their interest.
• Appointment & Tenure – Members are nominated by the board chair, a majority of INEDs or one-third of all directors, and elected by the board. – Term aligns with the three-year board tenure; members can be re-elected. – Loss of directorship or independence automatically terminates membership, with vacancies filled within three months as required by the Hong Kong Stock Exchange.
• Core Responsibilities 1) External Audit Oversight: – Assess auditor independence, effectiveness and remuneration. – Recommend appointment, re-appointment or removal of auditors. – Formulate policy on non-audit services and hold at least one private meeting per year with auditors.
2) Internal Audit & Controls: – Approve annual internal audit plans, review reports and monitor rectification of findings. – Evaluate design and effectiveness of financial controls, risk management and internal control systems. – Ensure sufficient resources and appropriate status for the internal audit function.
3) Financial Reporting Supervision: – Review integrity of annual, half-year and (where applicable) quarterly financial statements. – Focus on changes in accounting policies, significant judgements, major audit adjustments, going-concern assumptions and compliance with HK Listing Rules. – Monitor remediation of financial reporting issues.
4) Risk Management & Major Investment Evaluation: – Conduct risk assessments for significant investment projects and coordinate management’s response to investigative findings.
5) Communication & Whistle-blowing: – Act as the primary liaison among management, internal audit, external auditors and the board. – Oversee confidential channels for employees to report financial or control irregularities and ensure fair, independent investigations.
• Meeting Protocols – At least two meetings annually, convened by the INED chair; interim meetings can be called as needed. – Quorum requires two-thirds attendance; resolutions pass with a simple majority of all members. – Members must attend in person or by proxy; minutes are recorded and submitted to the board. – External parties (auditors, legal advisers, finance executives) may be invited to participate.
• Effective Date & Compliance The charter is effective upon board approval and supersedes previous versions. Where conflicts arise with evolving laws or HKEX regulations, the latter shall prevail.
By codifying these practices, Tongshifu aims to enhance oversight, ensure rigorous financial reporting and align its governance framework with international best practices.
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